Home prices spike as demand picks up in January

by Candyd Mendoza14 Feb 2020

Metro areas across the United States posted increases in home-sale prices las month as bidding wars heated up the market.

Home prices jumped 6.7% year over year in January to a median of $306,400 and up 0.7% month over month on a seasonally-adjusted basis, according to Redfin’s latest report.

The most affordable metro areas faced the biggest gains in home prices in January. Eighteen of the 20 metros with the most significant annual price increases had prices below the national median. Memphis topped the list (median price $182,900, up 17.1%), followed by Dayton, Ohio ($132,000, +14.8%), and Rochester, N.Y. ($148,500, +13.3%).

Of the 85 largest metro areas, only three experienced a year-over-year decline in the median sale price: San Jose (-4.3%), Baton Rouge (-4.1%), and Greenville, S.C. (-1.4%).

Housing market heats up

Home sales nationwide rose 6.7% year over year in January but fell 1.1% month over month on a seasonally-adjusted basis.

"Typically, we don't see this many buyers in January, but with mortgage rates at a three-year low, there are plenty of early birds hoping to secure a home and lock in an affordable mortgage payment," Redfin Chief Economist Daryl Fairweather said. "Home sellers, on the other hand, see that the market is clearly heating up and have no reason to rush to list their homes or to make price cuts in order to secure a sale. Back in December, it wasn't clear if demand would pick up in the new year, so some sellers were willing to accept lower prices, which borrowed some demand from January and resulted in the slight dip in sales we're seeing now."

Moreover, low inventory continued to push prices above asking in many markets across the country, even in the pricey coastal cities. The percentage of homes that sold above list price grew to 18.7% in January, up from 17.6% a year ago.

"Every home is getting multiple offers, often going for substantially above the asking price," said Robert Iles, Redfin agent in San Fernando Valley. "One offer I recently submitted for a client faced competition from 23 other offers, and that was when the seller's counteroffer included the term requiring our offer to be no less than $100,000 above the list price."

Active listings in January

There were fewer homes for sale in the market last month than any time since January 2013. Active listings plunged 11.4% year over year, marking the largest drop since March 2013 and the sixth consecutive month of declines.

None of the 85 metros Redfin tracked reported an annual increase in the count of seasonally-adjusted active listings of homes for sale.

Meanwhile, the sharpest declines in active housing supply last month were in Salt Lake City (-49.5%), Allentown, Pa. (-33.1%), and Kansas City, Mo. (28.9%).

The number of new listings also went down 4.5% from a year ago. Seasonally-adjusted new listings in Salt Lake City (-39.8%), Allentown, Pa. (-30.8%), and St. Louis, Mo. (27.8%) saw the steepest decline in December.

A typical home spent went under contract in 56 days, down from 58 in January 2019.

"Buyers are getting pretty upset about the lack of inventory," said Pauline Corbett, Redfin agent in Seattle. "There's a growing sense of desperation as bidding wars stretch out their home searches."